Semiconductor Chip War - The Key to World Domination in the Technology Era

Phan Van Hoa (According to tbsnews) DNUM_DAZADZCACE 14:57

(Baonghean.vn) - Semiconductor chips are considered the "brains" that control all electronic devices, from smartphones and computers to cars and airplanes. The increasing demand for semiconductor chips has led to a new global race between countries.

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Illustration photo.

Semiconductor manufacturing is incredibly complex and valuable. It has long been a battle between the world’s tech giants. Now it’s become a race between governments.

These key pieces of technology, known as integrated circuits or more commonly as semiconductor chips, are perhaps the tiniest yet most precise products ever made. And because they are so difficult and expensive to produce, the world relies on just a handful of companies, a dependence that has become even more apparent with the semiconductor shortages caused by the Covid-19 pandemic.

Access to semiconductors has also become a geopolitical weapon, with the US stepping up export restrictions to China to curb the rise of an economic competitor.

Why is the semiconductor war happening?

Semiconductors are seen as a vital component, at the heart of every breakthrough in artificial intelligence (AI), from improving the range of electric cars to guiding hypersonic missiles. Most of the world’s leading semiconductor technology originates in the United States. China is the largest market for electronic components and has a growing desire to produce more of the semiconductors it uses.

That has made the semiconductor industry a focal point for Washington as it tries to limit the rise of Asian competitors and address national security concerns. Beijing, for its part, has poured billions of dollars into efforts to build a domestic semiconductor industry and reduce its dependence on imports, which are increasingly being restricted by the United States.

At the same time, Europe and the United States are spending huge amounts of government money to bring semiconductor chip manufacturing back home, to reduce their dangerous dependence on a few factories in East Asia, they claim.

Why are semiconductor chips so important?

Semiconductors are essential for processing and understanding the vast amounts of data that are now competing with oil as the lifeblood of the economy. Semiconductors can perform a variety of functions, including memory chips, which store data and are traded as commodities; logic chips, which run programs and act as the brains of devices, are more complex and expensive.

Access to components like US semiconductor maker Nvidia's H100 AI accelerator, designed to handle massive AI workloads efficiently and quickly, has become tied to both national security and the fate of giant companies like Google and Microsoft as they race to build massive data centers to gain an edge in what is seen as the future of computing.

But even everyday devices increasingly rely on semiconductors. Every button press in a gadget-filled car requires simple chips to convert that touch into an electronic signal. And every battery-powered device requires chips to convert and regulate electrical current.

Who controls the semiconductor chip supply?

Semiconductor manufacturing has become an increasingly volatile and monopolistic business. New factories cost more than $20 billion, take years to build, and need to operate at full capacity 24 hours a day to be profitable.

Such a scale of factories has reduced the number of companies with advanced technology to produce semiconductor chips to just three, including Taiwan Semiconductor Manufacturing Company (TSMC), South Korea's Samsung Electronics and the US's Intel Corporation. TSMC and Samsung operate as foundries, providing outsourcing manufacturing services to companies around the world.

Everyone from Nvidia to the in-house efforts of Microsoft and Amazon depend on access to the best manufacturing facilities, much of which are in Taiwan. Intel, which has historically focused on making semiconductors for its own use, is now also trying to compete with TSMC and Samsung in the contract manufacturing space.

At the lower end of the spectrum is a huge industry that makes analog chips. Companies like Texas Instruments Inc. (US) and STMicroelectronics NV (French-Italian joint venture) are leading manufacturers of the components that control button presses and power switches in devices. This is the segment that China is targeting, investing heavily to boost production and gain market share.

What's going on in the geopolitical competition?

Despite China's massive spending, its semiconductor chipmakers remain dependent on US technology and their access to overseas chipmaking technology is shrinking.

In 2023, the US will impose tighter export controls on certain semiconductor chips and chipmaking equipment to prevent China from developing capabilities that Washington considers a potential military threat, such as supercomputing and artificial intelligence.

Several of China’s top tech companies, including Huawei, have been blacklisted. US semiconductor technology suppliers must get US government approval to sell to them, a move that is aimed at limiting China’s ability to develop advanced chips and build cutting-edge AI applications.

American politicians have decided they need to do more than contain China. The Science and Chips Act of 2022 would provide about $50 billion in federal funding to support American semiconductor manufacturing and cultivate the skilled workforce needed for the industry.

TSMC, Samsung and Intel - the three largest semiconductor chip manufacturers, have all announced plans to build new factories in the US.

Europe is also joining the race to reduce the concentration of manufacturing in East Asia. European Union countries agreed last November on a $46 billion plan to boost their semiconductor production. The goal is to double the bloc’s output to 20% of the global market by 2030.

In Asia, Japan has also earmarked about $26.7 billion in government money to revive its semiconductor industry and hopes spending in the sector, including private sector support, could reach $66.7 billion. One of the goals of the plan is to triple sales of domestically produced semiconductors by 2030.

What is Taiwan's position in the semiconductor chip race?

Taiwan emerged as a dominant force in global semiconductor chip manufacturing, thanks in part to a government decision in the 1970s to promote the electronics industry.

TSMC has almost single-handedly created the “foundry” business model for manufacturing semiconductor chips designed by other companies, an approach that has become popular with chip users as the cost of building new factories has skyrocketed.

Big customers like Apple have given TSMC the manufacturing capacity to build up its leading expertise in foundry, and now the whole world depends on TSMC. The company is set to surpass Intel in revenue by 2022.

But the race for semiconductors is not just about money, it is also about geopolitics. The United States has signaled that it will continue to try to limit China’s access to American-designed semiconductors made in Taiwanese foundries.

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Semiconductor Chip War - The Key to World Domination in the Technology Era
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